Exchange Fund sees HK$55bn first quarter loss

The Exchange Fund recorded a deficit of HK$55 billion in the first quarter of 2022 – its first quarterly loss in two years.

The Hong Kong Monetary Authority (HKMA) told lawmakers on Tuesday that bond investments were in the red for nearly HK$35 billion, more than double the loss suffered a year ago.

A loss of HK$34 billion was seen from its stocks portfolio, compared to a gain of HK$18.8 billion a year ago.

The fund saw an investment loss of HK$9.4 billion on the local market – the third straight quarter in the red.

A gain of nearly HK$14 billion in foreign exchange investments – 10 times the figure from a year ago – offset some of the losses.

The HKMA’s chief executive, Eddie Yue, said they are facing a number of challenging uncertainties that are likely to cause market turbulence, such as the conflict in Ukraine, interest rate hikes in the US, and the Covid-19 situation globally and in China.

“We will make sure that our tactical position will be defensive, we will remain liquid, and for the medium and longer term, we will try to diversify in order to generate the best returns for the Exchange Fund,” he told reporters.

Yue added that he expects the Federal Reserve to increase interest rates at a pace quicker than in the previous cycle five to six years ago, and for Hong Kong to do the same.